I. Field of the Invention
The present invention generally relates to methods for forecasting house prices for a property. More particularly, the invention relates to a method for providing house price forecasts by refining the precision of a price index for a housing submarket by using a separate geographically correlated index. According to the present invention, the index is estimated by a modified form of a repeat-sales model.
II. Background and Material Information
The goal of a repeat-sales index is to determine house price appreciation in a particular market. The market, however, is not homogeneous, and hence its definition is vague. In addition to the standard geographical variation, property type is an important separator of markets. For example, condominium property appreciation is substantially different from single family house price appreciation. As a result, using a single family house price index (or an aggregate single family and condominium price index) to model condominium appreciation results in significant errors. In addition, the amount of data available for estimating condominium price indices is typically less than one thirtieth of the amount available for estimating single family indices. There are insufficient observations to estimate a standard repeat-sales model index at the same geographical specificity for condominium properties as for single family houses.